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Robustness of Fourier estimator of integrated volatility in the presence of microstructure noise

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  • Mancino, M.E.
  • Sanfelici, S.

Abstract

The finite sample properties of the Fourier estimator of integrated volatility under market microstructure noise are studied. Analytic expressions for the bias and the mean squared error (MSE) of the contaminated estimator are derived. These formulae can be practically used to design optimal MSE-based estimators, which are very robust and efficient in the presence of noise. Moreover an empirical analysis based on a simulation study and on high-frequency logarithmic prices of the Italian stock index futures (FIB30) validates the theoretical results.

Suggested Citation

  • Mancino, M.E. & Sanfelici, S., 2008. "Robustness of Fourier estimator of integrated volatility in the presence of microstructure noise," Computational Statistics & Data Analysis, Elsevier, vol. 52(6), pages 2966-2989, February.
    • Handle: RePEc:eee:csdana:v:52:y:2008:i:6:p:2966-2989
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